Abstract.

This paper reviews the forces affecting oil supply and demand in the 1990s. Since the mid 1980s-with the exception of a relatively brief period during the Gulf War-the world oil market has been adequately supplied and prices have been low in comparison to the levels that prevailed in the previous decade. Over this period the world has been characterized by four key trends :

  1. Oil demand has been growing in the world outside the former Soviet Union

  2. Non-OPEC production (excluding the former Soviet Union) has been essentially flat

  3. Net exports from the former Soviet Union have been declining, and

  4. OPEC production and capacity have been rising.

The paper considers whether these trends will continue. It examines the drivers for oil demand in both the OECD and developing nations. It assesses the degree to which non-OPEC production can meet this demand and whether net exports from the former Soviet Union can recover. It then examines whether OPEC nations' investment policies are consistent with the expected rising demand for their oil. Finally, it assesses whether other forces, such as the environmental and tax policies of consuming countries, could have a significant impact on oil markets in the 1990s.

1. INTRODUCTION

This paper addresses the factors expected to influence oil supply and demand in the 1990s and beyond.

The methodology is traditional: it reviews recent developments and identifies the driving forces; it then questions whether these forces will remain dominant in the foreseeable future. In light of the exceptional changes in the Former Soviet Union, these developments are analysed separately from those in the rest of the world. Finally, a number of issues are raised which could affect oil markets as we move into the next century. 2. CURRENT OIL MARKET DEVELOPMENTS Reviewing world aggregates for energy consumption and production at the present time risks giving a misleading impression of the critical underlying trends. For example, global oil consumption in 1992 grew by a mere 0.5% to reach 10.5 Mm3/d (65.4 mbd), having been flat in 1991 and having grown by 1.1% in 1990. This appears to imply that oil demand is currently weak. In fact it disguises two critically important trends :

  1. The strength of oil demand in the world excluding non-OECD Europe-that is the world outside the Former Soviet Union and the rest of Eastern Proceedings of the 14th World Petroleum Congress 0 1994 The Executive Board of the World Petroleum Congress Published by John Wiley & Sons Europe. Oil consumption in this area-which comprises the OECD nations and the LDCsgrew by a sturdy 3% in 1992, and

  2. The weakness of oil consumption in non-OECD Europe. In 1992 oil consumption in non-OECD Europe fell by 14.5%-nearly 225 km3/d (1.4 mbd).

I will return to consider developm

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